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IT major Tech Mahindra reported a 27.5 percent year-on-year (YoY) rise in consolidated net profit to ₹1,203 crore for the third quarter ended December 31 as the company continued to improve its margins.
The revenue for the quarter rose 15 per cent to ₹8,944 crore as against ₹8,629 in the same quarter last year. Digital revenues contributed 33 per cent of the company’s revenues in the quarter.
With the growth seen in the third quarter, Tech Mahindra now has a revenue runrate of $5 billion. In US dollar terms, revenue was at $1.26 billion, up 4.3 per cent year on year.
Tech Mahindra has seen its margins improve for seven straight quarters, thanks to its focus on cost reduction, automation and use of platforms. In the third quarter, EBITDA margins were up 50 basis points to 19.3 per cent. This was also aided by rupee depreciation. Margins were at a four-year high.
“This is a milestone quarter for Tech Mahindra with $5 billion annual revenue run rate in sight,” CP Gurnani, Managing Director & Chief Executive Officer, Tech Mahindra said. “Our Run, Change and Grow strategy has helped us deliver a strong 10 per cent sequential growth in digital revenues. We are confident of continuing the growth momentum.”
Gurnani said the company’s goal to improve margins for 6-8 quarters is on track and while he expects the growth in margins to slow down, they will continue to improve. Guranani termed year 2019 as the year of 5G trials. He said the company expects increased spending from telcos globally even as cost pressures on them are on the rise. In the quarter, Tech Mahindra bagged deals worth $450 million, of which $250 million came from the telecom vertical.
Gurnani said the company is focusing on acquisitions that’ll both improve Tech Mahindra’s capabilities and increase its scale.
“We will continue to look for both scale- and capability-focussed acquisitions. The size of the acquisition will not be a gating criterion. What will be a gating criterion is the return on opportunity and impact on operational matrix,” said Vivek Aggarwal, global head for enterprise vertical solutions and portfolio companies.
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